‘Brexit’ from EU could cost UK economy £56bn each year – think tank

Britain can block immigration and allow its economy to contract by £56 billion or broker a new agreement with Brussels that would see the continued free flow of Europeans through its borders, a leading think tank says.

In a direct challenge to UKIP leader Nigel Farage, who has long
argued that Britain can prosper outside the EU by blocking
immigration, think tank Open Europe warned a unilateral exit from
the EU could spark a permanent 2.23 percent contraction of the
UK’s GDP by 2030.

Concerns over a possible Brexit (British exit from the EU) have
been the source of heated debate in recent months. A
Conservative-backed EU referendum is pledged to occur on the
issue in 2017.

Open Europe’s study, ‘What If,’ examined four potential scenarios
associated with a Brexit. The think tank ranked its findings in
terms of best-case and worth-case scenarios.

The worst form of Brexit would be Britain’s departure from the EU
customs union and single market in the absence of a trade deal
with the bloc’s member states, the think tank said.

This move would create extra tariffs at the bloc’s ‘hard border’,
resulting in an additional 10 percent on car exports to the EU.
Britain’s financial services industry would also be heavily
impacted, with severed access to the EU, Open Europe argued.

Persson said such a policy path would signal “mutual
destruction.”

He warned this could occur if Britain left on “very hostile
terms” and a breakdown in negotiations ensued. He noted this
route would also likely be accompanied by a 2.23 percent dent in
UK GDP.

A somewhat improved Brexit scenario would entail a free trade
agreement with EU member states, Open Europe claimed. The think
tank suggested this would mark an improved version of
Switzerland’s relationship with the EU.

Central to this deal, would be for Britain’s trading relations
with foreign states to remain intact. However, a 0.81 percent
contraction in GDP would still be likely, Open Europe said.

A slightly more beneficial policy route would see Britain scrap
multiple EU regulations and bring in “unilateral free
trade” whereby the UK could open its borders to foreign
competition, Open Europe said. It predicted such a move would
culminate in a 0.64 percent increase in UK GDP each year.

The best outcome, according to the report, would be for Britain
to secure a deal with the EU, put in force a unilateral free
trade deal and opt for maximum deregulation on EU rules. This
would pave the way for Britain to scrap the EU’s targets on
climate change and would result in an overall 1.55 percent
increase in the UK’s GDP, the group said.

Britain’s potential exit from the EU relates directly to the
Lisbon Treaty, an international agreement ratified in 2009. At
the time of the treaty’s implementation, critics across the
continent warned it would lead to the creation of a European
super-state, characterized by powerful, unelected bureaucrats.
Those who backed it, however, said it would help to carve a path
forward for the EU.

If Britons take inspiration from the deals sought by Switzerland,
continued unrestricted EU migration would likely be central to
any Brexit deal, Open Europe says.

The findings of its report pose a direct challenge to UKIP leader
Nigel Farage, who has long argued leaving the EU could be
profitable for Britons as long as the UK blocks immigration.

On Monday, Farage said immigration matters more than Britain’s
economy. The UKIP leader is yet to clarify, however, whether a
dramatic contraction of GDP is something Britain should sacrifice
in the wake of a Brexit.